Philippine economic zone authority (PEZA registered) can avail of 2 TAX

schemes
-

5% tax in lieu of all taxes = including business tax (ex. VAT)

Income tax holidays =only exempted from income taxes not include VAT,
limited to specific number of years
o 6 years = pioneering enterprise
o 4 years = for non-pioneering (business already existing)
Pvd: registered BOI (board of investments) and PEZA

Entity subjected to VAT:

-

Gross receipts 12 month taxable period = 1919500 ( before 2012 = 1500000)

Even does not exceed = voluntarily registered under the VAT law
o To avail the benefit of INPUT TAX (deduction to OUTPUT TAX)

Formula:
OUTPUT INPUT = VAT
OUTPUT > input = vat payable
Output < input = vat refund

ZERO RATED transactions:

-

Automatic zero rated (actual shipping abroad)

effective zero rated (constructive / use in goods which eventually shipped
abroad)

Sec 106
A. Export sales
-

The sale and actual shipment of goods from the Philippines to a foreign country irrespective of
any shipping agreement that may be agreed upon which may influence or determine the
transfer of ownership of the goods so exported, paid for in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);

Requirement
Seller must be a vat registered person
Actual shipment abroad (came from Philippines went outside the
Philippines)
Paid acceptable foreign currency

Accordance of the BPS = certification of inwards remittance

attesting paid acceptable in foreign currency

Shipping arrangement- does not matter as long as ni gawas sa pilipinas

-

The sale of raw materials or packaging materials to a non-resident buyer for delivery to a
resident local export-oriented to be used in manufacturing, processing, packing or repacking in
the Philippines of the said buyers goods, paid for in acceptable foreign currency, and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP);

o
o
o
o
o
-

Whats the distinction from the first one? Wala ni gawas sa pilipinas =
to be deliver to RESIDENT local export-oriented enterprise
Unlike in number 1, number 2 pertains to raw and packaging materials
only. Number 1 any goods.
Buyer must be non-resident
When can you be export-oriented enterprise? Total export sale must
exceed 70% of total production
Constructive = form part on the finished product which eventually
shipped abroad

The sale of raw material or packaging materials to export oriented enterprise whose export
sales exceed 70% of total annual production; Any enterprise whose export sales exceed 70%
of the total annual production of the preceding taxable year shall be considered an exportoriented enterprise;

o
o
o
o

Difference from 2nd type, buyer is not a non-resident. The buyer is the
export oriented enterprise.
Constructive = form part on the finished product which eventually
shipped abroad
To be export oriented enterprise, certification from the BIR for effective
vat zero rating.
Need not paid in foreign currency

Sale of
o
o
o

gold to BSP;
BSP only collect gold reserve to support Philippine money
Ex. Pawnshop, mining company
RR5-2013

Requiring sale of golds and other precious metals jewelries especially to non-resident
person, the seller required to pay VAT and sales tax in advance (business tax).

Transactions considered export sales under Executive Order No. 226, otherwise known as the
Omnibus Investment Code of 1987, and other special laws.
o
Ex. Sale to export processing zones, sale to diplomatic mission and consulates
o
Sales transaction with an entity engage in Export
o
Consulates = extension of territory on foreign territories

The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or
international air transport operations.
o
When are you engaged in internation shipping or international air transport operations? transfer
of passengers DIRECTLY to foreign territory.
o
Purchase of GSEF = Goods, supplies, equipment and fuel

Zero rated = sale of GSEF in the Philippines

Exempted = importation of GSF from abroad (GSF no equipment)

o
Purpose: to encourage international corporation investments

B. Foreign Currency Denominated Sale

Foreign currency denominated sale" means sale to a nonresident of goods,

except those mentioned in Sections 149 and 150, assembled or
manufactured in the Philippines for delivery to a resident in the Philippines,
paid for in acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
Distinction from export sale:
o Delivered to a RESIDENT (not necessary to an export oriented
enterprise)
o Covers any type of goods (not limited to raw or packaging materials)
o Sale to a NON RESIDENT
Exceptions:
149 automobiles
o Luxury cars
o

(RA 9224) such as trucks, cargo vans, jeepneys, delivery trucks,

yachts are not among the automobiles therefore they are guaranteed
zero-rate if the other requisites are present.

150 non-essential goods (ex. Perfumes, jewelries)

C. Sales to persons or entities whose exemption under special laws or

international agreements to which the Philippines is a signatory
effectively subjects such sales to zero rate.
Zero rated sale of services
-

The phrase "sale or exchange of services" means the performance of all kinds or services in
the Philippines for others for a fee, remuneration or consideration, including those performed
or rendered by construction and service contractors; stock, real estate, commercial, customs
and immigration brokers; lessors of property, whether personal or real; warehousing services;
lessors or distributors of cinematographic films; persons engaged in milling processing,
manufacturing or repacking goods for others; proprietors, operators or keepers of hotels,
motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in
securities; lending investors; transportation contractors on their transport of goods or cargoes,
including persons who transport goods or cargoes for hire another domestic common carriers
by land, air and water relative to their transport of goods or cargoes; services of franchise
grantees of telephone and telegraph, radio and television broadcasting and all other franchise
grantees except those under Section 119 of this Code; services of banks, non-bank financial
intermediaries and finance companies; and non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and bonding companies; and similar services
regardless of whether or not the performance thereof calls for the exercise or use of the
physical or mental faculties.
The phrase 'sale or exchange of services' shall likewise include:
(1) The lease or the use of or the right or privilege to use any copyright, patent, design or
model, plan secret formula or process, goodwill, trademark, trade brand or other like property
or right;
(2) The lease of the use of, or the right to use of any industrial, commercial or scientific
equipment;
(3) The supply of scientific, technical, industrial or commercial knowledge or information;(4)
The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right as is mentioned in
subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3);

(5) The supply of services by a nonresident person or his employee in connection with the use
of property or rights belonging to, or the installation or operation of any brand, machinery or
other apparatus purchased from such nonresident person.
(6) The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking, venture,
project or scheme;
(7) The lease of motion picture films, films, tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite transmission and cable
television time.
Lease of properties shall be subject to the tax herein imposed irrespective of the place where
the contract of lease or licensing agreement was executed if the property is leased or used in
the Philippines.

Processing, manufacturing, repacking of goods for someone who is doing business outside the
Philippines and such goods are subsequently exported, paid in acceptable foreign currency and
accounted for under BSP rules.

What are the requisites? (section 108 B)

VAT-registered person (the one rendering the service)
Services performed in the Philippines
Is this actual (actual shipping abroad) or effective (used in the product
which eventually goes out of the philippines)? ANSWER: Effective
Approved application or certification for effective vat zero rating
by the BIR is required (this is always required if effective zero
rating)

Requisites:
Processing, manufacturing, repacking for someone doing
business outside the philippines
SUBSEQUENTLY exported
Paid in acceptable foreign currency
Under the BSP rules

Services other than those mentioned in the preceding paragraph rendered to a person engaged
in the business conducted outside the Philippine or to a non-resident person not engaged in
business who is outside the Philippines when the services are performed, the consideration for
which is paid for in acceptable foreign currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP)

Take note, 1 and 2 have similar requisites

Services rendered to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such
services to zero percent (0%) rate;

Services rendered to persons engaged in international shipping or international air transport

operations, including leases of property for use thereof;

Services performed by subcontractors and/or contractors in processing, converting, or

manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of
total annual production;

If you notice, number 3 is international agreement na-again na nato.

Number 4 pertains to international shipping na-agian nasad. Number 5
is to exported oriented enterprise as well na-again napod.

Transport of passengers and cargo by air or sea vessels from the Philippines to a foreign
country;

o
-

There should no stopover in the country

Sale of power or fuel generated through renewable source of energy such as but not limited to
biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy
sources using technologies such as fuel cells and hydrogen fuels.

This list is exclusive.

Taxability of PAGCOR (Philippine amusement gaming corporation):

-

Is it subject to corporate tax? Priorly included in the list of those exempted

GOCC from corporate income tax
SC it is the intent of the legislators who made the law (RA 9337) to exclude
PAGCOR from the exemption
But as of VAT, there is no amendment. So not liable for VAT

VAT exempt transactions vs VAT zero rated transactions

-

VAT-Exempted transactions are not required to file tax return, VAT zero rated
transactions even though VAT is not paid filing of tax return is still required
VAT Zero rated can claim for input tax, VAT exempt cannot claim input tax
VAT zero rated needs a VAT registered person, VAT exempt not required